Opec+ remains stable as the European Union penalizes Russian oil

Opec+ has responded to rising volatility and growing market uncertainty by leaving its oil production unchanged.

The outcome of yesterday’s brief online meeting reflects the unpredictability of supply and demand in the coming months and the wild price swings of the past week.

The group of oil producers has just implemented the two million barrels a day reduction agreed at their last meeting.

Meanwhile, European Union sanctions against crude oil exports from Russia come into effect today, and China is tentatively easing the Covid measures that have eroded its fuel economy.

Brent crude plunged to its lowest level since September on Nov. 28 but ended up posting its biggest weekly gain in a month.

“With massive and compensating fundamental and geopolitical risks weighing on the oil market, Ministers understandably chose to stand firm and pull out,” said Bob McNally, president of advisers to Rapidan Energy Group.

The decision by the Organization of Petroleum Exporting Countries (OPEC+) and its allies is likely to last for at least a few more months.

The group’s joint ministerial oversight committee — led by Saudi Arabia and Russia — will meet again in February.

The outlook could be clearer by then, and the panel has the power to call extraordinary meetings if it thinks output policy may need to be changed.

The oil market could look very different going into early 2023 as several potentially historic shifts in supply and demand emerge over the coming days and weeks.

As Opec+ ministers convene their video conference, officials in Shanghai had just eased some of their Covid restrictions and joined other top-tier Chinese cities as authorities accelerate a shift towards reopening the economy after thousands of protesters took to the streets.

Top government officials have signaled a move away from the toughest containment measures that have weighed on the economy of the world’s largest oil importer.

Today, the EU will ban most seaborne imports of Russian crude and bar anyone else from using the region’s shipping or insurance services to buy Russian oil unless under a price cap of $60 a barrel.

It is unclear to what extent these measures will limit Russian exports.

According to data from Argus Media, the price cap is well above the $50 at which the country’s flagship crude is currently trading.

However, Moscow has said it would rather cut production than sell oil to any country that accepts the price cap.

With these powerful forces poised to push oil markets in unpredictable directions, Opec+ observers said the group’s decision was understandable.

“Opec+ extended existing quotas as expected amid uncertainty about post-ceiling Russia flows and a weaker China,” said Amrita Sen, chief oil analyst and co-founder of consulting firm Energy Aspects.

“The group will continue to monitor markets and should fundamentals deteriorate they will meet before June – currently the next scheduled ministerial meeting.”

https://www.independent.ie/business/world/opec-holds-steady-as-european-union-penalises-russian-oil-42194718.html Opec+ remains stable as the European Union penalizes Russian oil

Fry Electronics Team

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